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True or False: An increase in the
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- Q2 An increase in the aggregate price level, P, will most likely have which of the following effects? Select one: a. an upward shift in the LM curve. b. a rightward shift in the IS curve. c. a downward shift in the LM curve. d. a leftward shift in the IS curve.Suppose that in 2005, nominal wages decrease in Torania. Show how this event will change equilibrium output and price level by shifting either the SRAS or AD curve.What is the reason behind why the SRAS curve is upward sloping? There are few unutilised resources Higher price level means higher nominal wages Higher price level means higher real wages Lower price level will increase profit Nominal wages and input costs are sticky in the short run
- The greater is the marginal propensity to consume, the smaller is the marginal propensity to save. 1) True 2) False A rise in the price level decreases the real value of financial assets with fixed money values and, as a result, decreases spending by the holders of these assets. 1) True 2) FalseQ.1.17 A decrease in the price level will: (a) shift the AS curve to the left.(b) shift the AD curve to the left.(c) shift the AS curve to the right.(d) leave both the AD curve and the AS curve unchanged.Which of the following could shift the DAD (dynamic AD) curve to the right, all else equal? an increase in imports a higher real interest rate the Fed raising its target inflation rate a decrease in home purchases
- Explain in words how investment multiplier and the interest sensitivity of aggregate demand affect the slope of the IS curve.True or False with explanation; 1) With a horizontal LM curve, the amount of money in the economy is constant along the LM curve.Which of the following might cause the AD curve to shift to the right? an increase in government spending bullishness on the part fo investors an increase in the money supply all of the above
- According to the IS–LM model, what happens to the interest rate, income, consumption, and investment under the following circumstances?a. The central bank increases the money supply.b. The government increases government purchases.c. The government increases taxes.Use the IS-LM model to answer this question. Suppose there is a simultaneous increase in taxes and reduction in the money supply. Explain what effect this particular policy mix will have on output and the interest rate. Based on your analysis, do we know with certainty what effect this policy mix will have on investment? Explain.In the IS/LM model, the IS curve maps interest rates and saving maps spending and income maps expenditure and money supply maps prices and output maps output and interest rates